When open enrollment came around this year I decided to take a deeper dive into the plan details my company offers, instead of just enrolling in the PPO because I have a large family. My parents, friends, etc have always been proponents of the HMO/PPO when available and you have ongoing issues, or children. The benefits are supposed to be better, and the copays are supposed to make accessing healthcare options regularly, cheaper. But, do they?
My employer offers a PPO, and HRA, and an HSA plan. I’m going to skip the HRA and focus on the differences between the PPO and HSA plan. I’m going to do this analysis as I did for my family first. But I also ran it as an individual and will share those results as well. I hope this will help you take a more in depth look at their own benefits! I know Open Enrollment has passed for this year, but if you or your spouse change jobs mid year, or have another qualifying event, you can still make changes to your benefits. If not, there’s always next year.
If I sign up for the HSA, my employer provides $1000 in the HSA account each year toward expenses. They do not provide any cash like this on the PPO plan.
The deductible of the PPO is $1500. The deductible of the HSA is $3000 for a family.
The co insurance after meeting deductible is %20 with both plans.
The Out of Pocket Maximum on the HSA is $7000 per year. On the PPO it is $4500 for a family.
The PPO offers copays for doctors’ offices, specialist and emergency room visits. The HSA does not have a copay, everything is cash until the deductible is met and then coinsurance. Prescriptions have a $10 copay on the PPO, and are coinsurance after deductible on the HSA (or free after deductible on the HSA if using mail order pharmacy.)
I tried both my insurer, and my doctor’s office, and got the run around on the cost of an office visit. The best I could come up with was “somewhere between $75 and $150” and that is just a basic consultation with no tests, vaccines or other services. Finding pricing for anything was problematic. So, I decided to focus on the numbers I can easily see. Maybe there’s a solid direction to turn simply based on the basics.
Bi-weekly premiums for the PPO would be $261.96. For the HSA, they would be $141.76. Total PPO premiums for a year are $6810.96. Total HSA premiums for a year are $3685.76. This means the difference between the PPO and HSA premiums is $120.20, for a total of $3125.20 per year. We have our first significant difference here. Let’s plan to contribute that premium difference to the HSA account, and see where we end up with out of pocket costs.
With my employer contributing $1000, the HSA deductible that I’d be responsible for is $2000. I already have this covered, and then some, contributing the premium difference to the HSA account. I wouldn’t see any out of pocket costs to reach the HSA deductible. However it would be $1500 out of pocket to hit the PPO deductible on non copay care, on top of premiums.
From deductible to out of pocket max for the HSA is $4000, and for the PPO is $3000. I would have $1125.20 left over in HSA contributions after hitting the deductible, so to reach the max I would need $2874.80 out of pocket. With no such contributions, I would need another $3000 out of pocket to reach the PPO max. This means that my total out of pocket for the HSA to hit the deductible and $7000 per year max would only be $2874.80. My total out of pocket to hit the $4500 max for the PPO would be $1500 deductible and another $3000 for a total of all $4500 coming out of pocket after premiums.
Looking at these sums, it’s pretty easy to see that if you’re going to use your healthcare at all, with these plans, the HSA is the way to go. Just contribute to it up to the amount you’d be paying in premiums for the PPO, and you’ll more than cover your deductible, and then you’d also get all of the benefits of using an HSA if you don’t go through all of your contributions! HSA’s are pretty incredible. If you’re not familiar take a look at this post from the MadFientist – https://www.madfientist.com/ultimate-retirement-account/
For an individual plan my employer will contribute $500 yearly to an HSA account.Individual plan premiums are $41.07 for the HSA and $72.11 for the PPO. Yearly PPO premiums are $1874.86, while yearly HSA premiums are $1067.82. If we went about things the same way and contributed the difference to an HSA account, we would automatically contribute $807.40.
The Deductible for an individual PPO is $500, and $1500 for the HSA. The out of pocket max for the PPO is $2500, and $3500 for the HSA on an individual plan.
Doing the same math, $1500 HSA deductible minus $500 from employer, minus 807.40 that we’re already contributing to the HSA account means to hit the deductible we would need $192.60 out of pocket. It would be the full $500 out of pocket on the PPO plan. To hit the out of pocket max on the HSA would be $192.60 + $2000 for a total out of pocket of $2192.60. To hit the out of pocket max on the PPO would be $500 deductible plus another $2000 all out of pocket for a total of $2500.
In both the family case, and the individual case, the HSA is cheaper to reach the deductible and start the 20% co-insurance. In both cases the HSA is cheaper to hit the out of pocket max. Only the HSA has the benefit of being pretax dollars though, and all of the other benefits it offers in the MadFientist’s previously linked article. The HSA in this case was the hands down winner, and we switched to it starting in January.
If you’ve wondered how to figure out your benefits decision like this, I hope this serves as a fairly simple guide to follow. Just plug your plans’ numbers in where mine are and recalculate the sums or differences. If you found this helpful, please let me know! If you see somewhere I’ve made an error, or bad logic, point that out as well in the comments. I want everyone to get the most healthcare bang for their buck, at least until the US catches up with the rest of the world and insures everyone with reasonable cost and access.